Third Standing Committee on Statutory Instruments, &c.


Wednesday 3 February 1988



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The Committee consisted of the following Members:

Chairman: Mr. Geraint Howells

Callaghan, Mr. Jim (Heywood and Middleton)

Cope, Mr. John (Minister for Employment)

Cryer, Mr. Bob (Bradford, South)

Darling, Mr. Alistair (Edinburgh, Central)

Emery, Sir Peter (Honiton)

Flynn, Mr. Paul (Newport, West)

Graham, Mr. Thomas (Renfrew, West and Inverclyde)

Goodson-Wickes, Dr. Charles (Wimbledon)

Heathcoat-Amory, Mr. David (Wells)

Hicks, Mr. Robert (Cornwall, South-East)

Hill, Mr. James (Southampton, Test)

Hind, Mr. Kenneth (Lancashire, West)

Holt, Mr. Richard (Langbaurgh)

Jones, Mr. Robert B. (Hertfordshire, West)

Kennedy, Mr. Charles (Ross, Cromarty and Skye)

Lightbown, Mr. David (Staffordshire, South-East)

McNair-Wilson, Mr. Patrick (New Forest)

Strang, Mr. Gavin (Edinburgh, East)

Willoughby, Mr. R. J. Committee Clerk

2 3 Third Standing Committee on Statutory Instruments, &c. Wednesday 3 February 1988

[MR. GERAINT HOWELLS in the Chair]

Draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1987

10.30 am

The Minister for Employment (Mr. John Cope): I beg to move, "That the Committee has considered the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1987." I suggest that it will be convenient to discuss with this the draft Employment Protection (Variation of Limits) Order 1987. These two orders are annual uprating orders under the Employment Protection (Consolidation) Act 1978 and their purpose is well known. The changes are described in the explanatory notes to the various orders. The Government's responsibility is to try to arrive at acceptable increases for these limits. We are not required to consult, but consultations reveal, not surprisingly, that employer organisations are in general against any increase on the ground of extra cost to industry and the potential damage to employment. On the other hand, the TUC was in favour of increases in line with average earnings. The increases that the Government propose are in line with the retail price index. I commend them to the Committee.

10.31 am

Mr. Bob Cryer (Bradford, South): I offer apologies to the Committee on behalf of my hon. Friend the Member for Edinburgh, East (Mr. Strang), who is attending a funeral. Having sympathised with nurses who have been forced out by the Government I have returned from picket line duty at a hospital this morning to attend the Committee. First, let me deal with the Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1987. As the Minister said, this is an automatic uprating, but one on a fairly high base. The order is to put into operation and effect the order to persuade people not to join a trade union. Although it contains provision for unfair dismissal by virtue of membership or non-membership of a trade union, the reality is that employers dismiss people for trade union membership for other reasons, and therefore these limits are for people who refuse to join a trade union but, by virtue of closed shop arrangements, are dismissed because of that refusal. The Government will remove that safeguard for membership of a trade union by the employment legislation. 4 The order includes compensation for two years' pay or £11,950, whichever is the greater, with a maximum of no more than £23,850. These are substantial sums when compared with the Employment Protection (Variation of Limits) Order, which is for unfair dismissal or redundancy, or where an employer refuses to take a person back into employment after a tribunal has made that award. The compensation is laid down in the second order. Why do the Government persist with these great disparities? The figure in the second order, of an increase from £158 to £164 for the maximum amount of a week's pay as the basis for the compensation, is small compared with the figures in the first order. I realise that when the Government introduced the legislation to provide for compensation for non-membership of a trade union they were ideologically driven to attack trade unions, but it is a startling disparity. The Committee may remember James Goad, who in the 1960s was employed at Chrysler and was suddenly told by God that he should not be in a trade union and caused a huge dispute. In fact, God was more likely to be in the guise of the CBI or the Employers' Federation. The James Goads of the world would obtain a massive £23,850 maximum, which seems unfair, bearing in mind that a person who is dismissed by an employer and whose case is upheld by the tribunal, by contrast, will get a much lower sum, based on the weekly wage of £164 maximum. It seems a disparity based not on fairness but on prejudice. I shall be grateful if the Minister will tell us why there is this disparity between the two orders. I do not intend to oppose the orders, because although I regard the first as a means of undermining trade union membership it is conceivable that somebody might be dismissed specifically for being a member of a trade union, although employers rarely use this as a justification; they use a pretext such as being two minutes late for two days in succession, or the standard of workmanship. Lord Wedderburn, a distinguished member of the House of Lords, who has great experience of industrial legislation, has pointed out that the order is designed for those people who refuse to be members of trade unions. The second order is important because it is the basis on which redundancy payments are made, and there is a great deal of redundancy because of the Government's policies. They say that there is an improvement in service industry jobs—generally the low-paid and badly organised jobs—but under the Government's policies since 1979 there has been a loss of 2 million jobs in manufacturing industries. There is an enormous balance of trade deficit in manufactured goods, which indicates the decline in our manufacturing ability. Many redundancies have taken place and will continue to take place, because the decline in unemployment has been only temporarily arrested. The Government are nowhere near the level of unemployment that they inherited when they took office in 1979. The order covers unfair dismissal. The list on page 2 covers the "additional award of compensation where employer fails to comply with order for reinstatement or re-engagement" 5 It covers the "limit on amount of 'a week's pay' for the purpose of calculating basic award of compensation for unfair dismissal under section 73 of the 1978 Act." The final paragraph defines the "limit on amount of 'a week's pay' for the purpose of calculating redundancy payment." They are all important categories, but on the low side. I ask the Minister why he does not take a leaf out of the other order and provide higher standards for the redundancy terms which affect the vast majority of people. Where an employer has been unfair and has been judged as unfair, and he refuses to take back an employee because of his arbitrary view and the power of captial—and he has the power to do this even though the institutions that we have established to judge these matters say otherwise—surely there should be at least the level of compensation given in the first order. Redundancy is a cataclysmic occasion. I can speak with strong feeling because I was made redundant from this place in 1983 owing to the gerrymandering of the boundaries by the Government. The local press wanted to take photographs of me signing on, which I refused because it was not a very pleasant occasion. The redundancy payment from this place was rather better than the redundancy payment laid down here. Because it is a cataclysmic occasion and people do not know how long they will be out of work, it seems to me that the limits should be higher. If the compensation can be a maximum of £23,850 for one circumstance of redundancy, why cannot it apply to a wider range of redundancies, which affect the vast majority of people? Unfair dismissal is plainly just that, but it is injustice when an employer sacks somebody unfairly. Not only is there difficulty because people no longer have a job, and the reputation that they have been sacked follows them around, with the difficulty of convincing an employer that they are worth employing; there is also the fierce sense of injustice that the employer behaved badly. For unfair dismissal that is shown to be correct there ought to be a much higher range of compensation. I do not expect the Government to do much about it, because the disparities between the two orders are based on their political philosophy, which is that it is somehow worse for people to be made redundant because they stand out against a trade union, which the Government would regard as entirely laudable—the more people who can be moved by God, the CBI or the Employers' Federation the better—even though people have taken a majority decision. The Government are fond of ballots. They have laid down that there shall be a certain qualification for a closed shop. There must be an overwhelming majority, which they have defined as 80 per cent. of those eligible to vote. It is not a qualification that they laid down for their legislation, because if they did they would not get it through. It is another demonstration of their hypocrisy and double standards. Opposition Members are concerned that when people say that they do not want to be in a trade union, even though there has been a majority decision and they can argue that the closed shop should be changed and they 6 can seek a fresh ballot in the future, they can still get compensation of £23,850 laid down in the first order. This contrasts starkly with the second order, because had the increase taken into account simply the increase in prices from 1978, according to the Library the figure in the order would be not £164—an increase of £6—but £210 at March 1988. The order comes into force on 1 April 1988. I should like the Minister to say why the increase is not of that sort of order to take into account the movement of prices since the provision was first made. We will not oppose the orders, for the reasons that I have stated. Nonetheless, there are strong feelings of unease about the disparity between the two orders and I hope that the Minister will take a few moments to explain the position. These Committees often rubber-stamp these documents far too easily, and Ministers who come to these Committees think that they can move them in five minutes and everyone can go down to the cafeteria for a cup of coffee. These Committees are part of a system of accountability. The Government have to pay some heed to this Committee and provide an explanation, and I am sure that the Minister will do so. But in the last Committee that I was on of this nature the Minister did not have a single civil servant with him and he was not able to provide any answers except in the usual form, "I will write the hon. Member." The virtue of these Committees is that the discussions are recorded. The explanations of the Minister, given in the Committee, are recorded in the Committee's deliberations, so that they are a part of the parliamentary record. Letters written afterwards do not have the same permanence or, indeed, the same importance, because they are not on the parliamentary record. I hope that the Minister will recognise his duty as a Minister and seek to give as full an explanation as possible.

10.46 am

Mr. Richard Holt (Langbaurgh): In his introduction my hon. Friend referred to accepted increases on an annualised basis as though there is some holy writ that says that there has to be some increase on an annual basis. The Act refers to variations, and variations can go downwards as well as upwards. At the very least, I feel there should not be annual increases. The Minister has the right to exercise judgment, and that is written into the Act. If Ministers can say that there should be no increase in child benefit I can see no reason why there should be an increase in the sums paid by reason of this order. The discretion is there. But it becomes habitual on an annualised basis, and, as the hon. Member for Bradford, South (Mr. Cryer) said, one tends to rubber-stamp things at these Statutory Instrument Committees; what ministers will shall be put through. I challenge the Minister to say on what basis he came to the conclusion that there had to be an increase. Where is the justification in that variation? He has heard from the employers that they do not wish to have this increase. We all know that to go before an industrial 7 tribunal is a lottery. I have been on quite a number of industrial tribunal cases, sufficient to justify that statement. If, for instance, the employer has failed to hand out, wrongly but nevertheless incidentally, a contract of employment, a dismissal case can be held valid against him, and he has to pay the compensation as a consequence of that even though the substantial element of the reason for the dismissal may be fairly justified. I see no prima facie case why, automatically on an annualised basis, this increase should go on. It was not done for dog licences; why should it be done in this sphere? Every time we come to these meetings it is, as the hon. Member for Bradford, South says, a rubber-stamping exercise without justification. I wanted to hear, in the preamble to the introduction, why the Government had chosen to make an increase, and why they had chosen the figures that they had chosen. I could find no logic in them. If the Government cannot justify what they are doing, they should not do it. They should at least have a case for bringing the figures before us. I hope to be persuaded by the Minister that the Government do have a case, but simply because it has been habitual is not in itself a justifiable reason. I understand the feelings of the hon. Member for Bradford, South on the variation between the two sets of orders and I will listen with interest to hear why the Government have not said they will increase one and not the other. It also gives me the opportunity to put on record the fact that we do not have before us, and we do not have the opportunity to speak about, the amount of money that is paid to the chairmen of the tribunals and the people who sit on those tribunals. That is done by ministerial discretion and unless one asks, as I have done, to find out how much it is one will not know. It is a large and substantial sum of money, yet we do not know what the increase is. I wonder whether the increase that was last granted—or will next be granted—to the chairmen of tribunals or to those who sit on tribunals will be in line with the award for the nurses, for instance, or for anybody else. My guess is that it will not. I guess that the chairmen of tribunals will have a substantially higher increase, and allowances increase. I shall not vote in favour of this piece of legislation. It is important at times to make a mark, and I want to indicate that there should be a breaking of the mould on this automatic increase. Automatic increases always lead to inflation and many other problems, and that was not what was in the law when it was passed; it was for variations. I look forward to the day when the Minister brings to the Committee a variation to reduce the amount of money. Then I shall believe that the exercise has been properly looked into and not merely rubber-stamped in the manner that has already been indicated.

10.51 am

Mr. Alistair Darling (Edinburgh, Central): I shall address the Committee briefly on the draft Employment Protection (Variation of Limits) Order. Having listened 8 to the justifiable arguments advanced by my hon. Friend the Member for Bradford, South (Mr. Cryer) and to arguments that I do not agree with, from the hon. Member for Langbaurgh (Mr. Holt), I find that it is almost like a Dutch auction. Those on the Opposition Benches argue that the awards generally are too low and hon. Members on the Government Benches argue that they are too high. The Minister indicated that the CBI thought the awards far too high and the TUC thought them too low, and he argued justifiably that he had had to strike a balance somewhere in the middle. I hope that this is not regarded as a Dutch auction. To those who are affected by the awards the question of how much is received can be a serious matter, especially as those who are dismissed or who cease to be employed often find that that is the last time they are employed, at least in any meaningful way. It is on that basis that I wish to address the Committee. The amount payable in respect of redundancy and unfair dismissal was fixed when the legislation was first introduced, but whilst today we are looking at the annual variation, and perhaps of necessity we are talking about a comparatively small difference between last year's awards and next year's awards, it strikes me that the baseline is now hopelessly out of date. I do not know whether it was right when it was first fixed, but having appeared for many people before tribunals and having advised them on the rights and remedies open to them I know that it is increasingly obvious that to many people the option of claiming for unfair dismissal or for constructive dismissal is sometimes not an option for financial reasons. I well remember advising someone in middle management who was earning between £14,000 and £15,000 a year, who was likely to be dismissed because of growing difficulties and who might well have had a case for constructive dismissal, that it was not worth his bothering about—that even if he had won and had been awarded everything to which he was entitled he would have lost out, and although he had an older family he would have been in severe financial difficulties.

Mr. Holt: I cannot quite see how anyone could be financially worse off going to an industrial tribunal. It costs nothing. The claimant can present his case, and if at the end of the day it goes against him it has cost him nothing but his own time. I do not see the logic of the argument of advising somebody that he could lose money. Could the hon. Member for Edinburgh, Central (Mr. Darling) expand his argument that expenditure is involved on the part of the applicant?

Mr. Darling: There is clearly some confusion. I was not talking about the expenses occasioned by going to a tribunal, as opposed to someone who might raise an action for damages in the courts and who might, if he or she lost, be landed with a considerable sum. I was pointing out that when anyone embarks on litigation he must weigh up whether he is likely to obtain more from the tribunal or court than would have been the case had he remained in post and soldiered on no matter what difficulties, or perhaps not pushed matters that might have precipitated dismissal, which, at the end of the day, might or might not have been unfair. 9 My argument is that this man would have been better off remaining in his employment come what may, putting his head down and forgetting about some of the things that had happened rather than reaching a situation in which his employment was terminated by his employer or he claimed constructive dismissal, because if he relied only on what he would get by way of an award he would have been substantially worse off. That was my point; I was not dealing with the question of the costs occasioned by going to a tribunal. That is another matter, and it is not the subject of our discussions. My point is that if Parliament has decided that remedies are to be granted to those who seek compensation as a result of their unfair dismissal the awards should be realistic. They are now hopelessly out of line and unrealistic, and whilst I welcome any variation in an upwards direction—because if we do not do that the legislation begins to lack more and more teeth—I suggest that the time is rapidly approaching when we should revise the whole system of the awards rather than simply looking at an annual variation.

10.56 am

Mr. Cope: The debate has pointed up the dilemma that a Minister in my position faces when deciding what increases to recommend. First, I welcome the reappearance for the Opposition of the hon. Member for Bradford, South (Mr. Cryer). His colleague, the hon. Member for Edinburgh, East (Mr. Strang), explained to me why he was not able to be here. I am glad that the hon. Member for Bradford, South has been able, as it were, to terminate his own redundancy, first in Europe and now here, and come back. He is one of my predecessors as the Minister responsible for small firms, and I know, or I like to think, that he still has their interests very much at heart. The hon. Member for Bradford, South was particularly concerned about the differences in treatment in the two orders, in different situations. There is no difference in treatment between the two orders. The increases that are proposed, where we are proposing increases, are, within a percentage point, the same, with slight variations for rounding, on the two different orders. The difference is long standing; it goes back to the original legislation and is intended as a deterrent. The increased limit is intended as a deterrent. The individual should be free to decide whether to belong to a trade union. That is the purpose of having a higher limit in that respect. On the question of what the increases should be, I recognise that if the limits had been increased in line with earnings since the legislation was first introduced some 10 years ago the increases would be substantially larger. Both the hon. Member for Bradford, South and the hon. Member for Edinburgh, Central made that point in different ways. But that would send a message out to employers and would be a considerable burden to them when cases went against them. There is already some evidence of employment protection legislation deterring employers from taking on more employees. We are concerned about that, and anxious to minimise it as much as possible.


Mr. Cryer: These claims have been repeatedly made, but no evidence has been produced. If the Department has evidence, would the Minister care to publish it by laying it in the Library, so we can examine it and assess the evidence?

Mr. Cope: The evidence comes from surveys done by the Department of Employment. I shall certainly consider the suggestion made by my hon. Friend the Member for Langbaurgh (Mr. Holt)>. We have to weigh up whether we are deterring employers from taking on more employees and the financial burden on employers. Jobs come from employers. It is employers who create jobs by having the initiative to build up their firms and to make sure that they trade successfully and are able to employ people. That is one half of the argument. We also have to consider employees who find themselves unfairly dismissed in various circumstances, and to consider whether, if we were to follow my hon. Friend's argument and have no increases at all, we would allow these limits gradually to wither. They would do so gradually, because inflation is not as serious as it has been; nevertheless, they would come down, until they were no longer proper compensation for someone who was held to be unfairly dismissed. I recognise that some people criticise individual decisions of the tribunals on the question whether people have been unfairly dismissed. It is inevitable that some of the decisions should be controversial, but we have to recognise that having gone through the statutory process set up by the House a decision has been made by a tribunal that someone has been unfairly dismissed in the terms presented, and even if some of the cases are arguable, many will be genuine, reasonable cases, and we shall have to provide for suitable compensation in those cases. We have to keep a balance. My hon. Friend the Member for Langbaurgh was quite right to say that nothing in the Act provides that there has to be an increase. We have to review the increases under the first order each year, and make a positive decision. Under the second order we do not necessarily have to review them, but we do review them at the same time. The discretion is there at the end of the review not to have an increase, or to have a decrease if we are anxious to propose that to the House. There is no objective method of judging who is right in this. There cannot be; it has to be a matter of judgement, balancing the factors that I have described and trying to arrive at what the increase should be. Our proposal, which is broadly in line with the rise in the retail price index over the relevant period, seems to be the right thing to do in the circumstances.

Mr. Holt: In reaching this conclusion will my hon. Friend also vary the limitations for cases that are found to be frivolous and vexatious?

Mr. Cope: I shall have to check the position before answering that point, this year we are not proposing to increase the £8,500 compensatory award, which is another of the limits that is reviewed. It has not been increased in every year. It was increased last year by a 11 slightly larger amount than the other amounts, and this year we are not proposing to increase it. It remains at £8,500.

Mr. Cryer: Would the Minister draw his hon. Friend's attention to the disparity between this annual increase for people who are subject to unfair dismissal and the increase for Members of Parliament this year? I wonder whether he has the two percentages in mind.

Mr. Cope: The hon. Member for Bradford, South (Mr. Cryer) may not have been present when we had our discussions about Member's pay. If he refers to those discussions he will see that the question was dealt with at some length. He will understand the attitude that the Government took at the time. But it would not be appropriate to follow it very far this morning. With the exception of the £8,500 limit, we are proposing increases in line with the retail price index. I do not claim that this has any magic, or that there is a magic formula that would enable me to prove that this is the right amount. It is not that sort of thing. It is a question of a balanced judgment between the various practices that I referred to, and it is the best increase to suggest for these various limits.


Question put.

The Committee divided: Ayes 4, Noes 1.

Cope, Mr. John Lightbown, Mr. David
Jones. Mr. Robert B. McNair-Wilson, Mr. Patrick
NOES Holt. Mr. Richard

Question accordingly agreed to.

Resolved, "That the Committee has considered the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1987."


Resolved, "That the Committee has considered the draft Employment Protection (Variation of Limits) Order 1987."—[Mr. Cope.]

Committee rose at six minutes past Eleven o'clock.


Howells, Mr. Geraint (Chairman)

Callaghan, Mr.

Cope, Mr.

Cryer, Mr.

Darling, Mr.

Graham, Mr.

Hill, Mr.

Holt, Mr.

Jones, Mr. Robert B.

Lightbown, Mr.

McNair-Wilson, Mr. Patrick